U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                   FORM 10-QSB
(Mark One)

[X]               QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 1998

[ ]               TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

            For the transition period from____________to____________


                         Commission File Number: 0-12231

                             BAY COMMERCIAL SERVICES
          (Exact name of small business issuer as specified in its charter)

         California                                             94-2760444
         ----------                                             ----------
(State or other jurisdiction of                            (I.R.S.Employer
incorporation or organization)                          Identification No.)

                              1495 East 14th Street
                          San Leandro, California 94577
                          -----------------------------
                    (Address of principal executive offices)

                                 (510) 357-2265
                                 --------------
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

YES   X          NO
    ----           ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

Class                                              Outstanding at April 30, 1998
-----                                              -----------------------------
Common stock, no par value                         1,080,720  shares


Transitional Small Business Disclosure Format

YES             NO  X
   ----           ----
This report contains a total of 15 pages.

<PAGE>


<TABLE>
                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
                      Consolidated Condensed Balance Sheets
<CAPTION>
                                                                               March 31,
                                                                                   1998   December 31,
(Dollars in thousands): .....................................................(unaudited)         1997
-----------------------------------------------------------------------------------------------------
<S>                                                                           <C>           <C>
ASSETS
Cash and due from banks ..................................................... $  14,150     $   7,548
Federal funds sold and reverse repurchase agreements ........................     8,400           ---
-----------------------------------------------------------------------------------------------------
  Cash and cash equivalents .................................................    22,550         7,548
-----------------------------------------------------------------------------------------------------

Securities available for sale, stated at fair value
  (amortized cost of $11,469 for 1998; $24,663 for 1997) ....................    11,482        24,651
Securities held to maturity (fair values of $8,094 for 1998;
   $8,057 for 1997) .........................................................     8,003         7,929

Loans held for sale .........................................................     1,002         1,501
Loans held for investment ...................................................    78,713        72,628
  Allowance for loan losses .................................................    (1,005)       (1,000)
-----------------------------------------------------------------------------------------------------
  Net loans .................................................................    78,710        73,129
-----------------------------------------------------------------------------------------------------
Premises and equipment, net .................................................     2,063         2,111
Interest and fees receivable ................................................       682           566
Other assets ................................................................       370           435
-----------------------------------------------------------------------------------------------------
  Total assets .............................................................. $ 123,860     $ 116,369
=====================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
  Noninterest-bearing demand ................................................ $  35,098     $  29,076
  Savings and interest-bearing demand .......................................    32,741        29,203
  Time ......................................................................    29,892        30,022
  Certificates of deposit, $100 and over ....................................    13,571        12,834
-----------------------------------------------------------------------------------------------------
  Total deposits ............................................................   111,302       101,135
-----------------------------------------------------------------------------------------------------

Securities sold under agreements to repurchase ..............................     1,192         1,290
Federal funds purchased .....................................................       ---         2,500
Interest payable and other liabilities ......................................       916         1,271
-----------------------------------------------------------------------------------------------------
  Total liabilities .........................................................   113,410       106,196
-----------------------------------------------------------------------------------------------------

Commitments and contingent liabilities ......................................       ---           ---

Shareholders' equity:
  Common stock - no par value: authorized 20,000,000 shares;
   issued & outstanding 1,080,720 in 1998; 1,078,720 in 1997 ................     3,680         3,671
  Retained earnings .........................................................     6,763         6,509
  Net unrealized gain (loss) on securities available for sale, net of taxes .         7            (7)
-----------------------------------------------------------------------------------------------------
  Total shareholders' equity ................................................    10,450        10,173
-----------------------------------------------------------------------------------------------------
  Total liabilities and shareholders' equity ................................ $ 123,860     $ 116,369
=====================================================================================================
See accompanying notes to consolidated condensed financial statements
</TABLE>




<PAGE>
<TABLE>



                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
             Consolidated Condensed Statements of Income (unaudited)
<CAPTION>
                                                            Three Months Ended
                                                                  March 31,
(Dollars in thousands, except per share amounts): ....        1998        1997
------------------------------------------------------------------------------
<S>                                                       <C>         <C>
Interest income:
  Loans, including fees ..............................      $1,935      $1,731
  Federal funds sold and reverse repurchase agreements          55          48
  Securities:
    Taxable ..........................................         279         197
    Tax exempt .......................................          60          45
------------------------------------------------------------------------------
      Total interest income ..........................       2,329       2,021
------------------------------------------------------------------------------
Interest expense:
  Deposits:
    Savings and interest-bearing demand ..............         204         154
    Time .............................................         386         365
    Certificates of deposit, $100 and over ...........         184         118
  Other borrowed funds ...............................          18          28
------------------------------------------------------------------------------
      Total interest expense .........................         792         665
------------------------------------------------------------------------------
      Net interest income ............................       1,537       1,356
Provision for loan losses ............................          10         ---
------------------------------------------------------------------------------
      Net interest income after
        provision for loan losses ....................       1,527       1,356
------------------------------------------------------------------------------
Noninterest income:
  Bankcard income ....................................          96          66
  Service charges and fees ...........................          68          68
  Gain on sale of loans ..............................          33         ---
  Loan servicing .....................................          24          35
  Other ..............................................          27          25
------------------------------------------------------------------------------
      Total noninterest income .......................         248         194
------------------------------------------------------------------------------
Noninterest expenses:
  Salaries and employee benefits .....................         793         708
  Occupancy ..........................................         170         174
  Data processing ....................................          85          77
  Bankcard processing expense ........................          79          52
  Professional services ..............................          28          36
  Other ..............................................         232         205
------------------------------------------------------------------------------
      Total noninterest expenses .....................       1,387       1,252
------------------------------------------------------------------------------
      Income before income tax expense ...............         388         298
Income tax expense ...................................         134         116
------------------------------------------------------------------------------
      Net income .....................................      $  254      $  182
==============================================================================
      Net income per common share - basic ............       $0.24       $0.17
      Weighted average common shares - basic .........   1,079,653   1,076,720
      Net income per common share - diluted ..........       $0.20       $0.15
      Weighted average common shares - diluted .......   1,279,707   1,244,652
==============================================================================
See accompanying notes to consolidated condensed financial statements.
</TABLE>


<PAGE>
<TABLE>

                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
                 Consolidated Condensed Statements of Cash Flows
<CAPTION>
                                                               Three Months Ended
                                                                      March 31,
(Dollars in thousands): .......................................    1998      1997
----------------------------------------------------------------------------------
<S>                                                             <C>       <C>
Cash flows from operating activities:
  Net income .................................................. $   254   $   182
  Adjustments to reconcile net income to
    net cash provided by operating activities:
      Depreciation and amortization ...........................      (4)       74
      Provision (benefit) for loan losses .....................      10       ---
      Unamortized deferred loan fees, net .....................     (62)      (27)
      Originations of SBA loans held for sale .................    (158)     (146)
      Proceeds from the sale of SBA loans held for sale .......     734       ---
      Change in interest and fees receivable and other assets .     (48)       (3)
      Change in interest payable and other liabilities ........     (37)      (65)
----------------------------------------------------------------------------------
    Net cash provided by operating activities .................     689        15
----------------------------------------------------------------------------------
Cash flows from investing activities:
  Proceeds from maturities of securities available for sale ...  17,244        97
  Proceeds from maturities of securities held to maturity .....      71       160
  Purchase of securities available for sale ...................  (3,975)      ---
  Purchase of securities held to maturity .....................    (144)     (205)
  Net change in loans .........................................  (6,113)      936
  Purchases of premises and equipment .........................     (24)     (157)
----------------------------------------------------------------------------------
    Net cash provided by investing activities .................   7,059       831
----------------------------------------------------------------------------------
Cash flows from financing activities:
  Net change in deposits ......................................  10,167     5,676
  Net change in securities sold under agreements to repurchase      (98)      (98)
  Net change in federal funds purchased .......................  (2,500)     (500)
  Exercise of stock options ...................................       9      --
  Cash dividends paid .........................................    (324)     (323)
----------------------------------------------------------------------------------
    Net cash provided by financing activities .................   7,254     4,755
----------------------------------------------------------------------------------
    Net change in cash and cash equivalents ...................  15,002     5,601
Cash and cash equivalents at beginning of year ................   7,548     6,945
----------------------------------------------------------------------------------
Cash and cash equivalents at end of year ...................... $22,550   $12,546
==================================================================================
Supplemental disclosure of cash flow information: Cash paid during the year for:
    Interest .................................................     $676      $655
    Income taxes .............................................      ---       ---
See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>



                     Bay Commercial Services and Subsidiary
        Notes to Consolidated Condensed Financial Statements (Unaudited)


1)      All adjustments (consisting only of normal recurring accruals) which, in
        the opinion of Management,  are necessary for a fair presentation of Bay
        Commercial Services and Subsidiary (the "Company") financial position at
        March 31, 1998 and December  31, 1997 and the results of its  operations
        and its cash flows for the three month  periods ended March 31, 1998 and
        1997 have been  included.  The results of operations  and cash flows for
        the periods presented are not necessarily  indicative of the results for
        a full year.

2)      The accompanying  unaudited financial statements have been prepared on a
        basis consistent with the accounting  principles and policies  reflected
        in the Company's annual report for the year ended December 31, 1997.

3)      Net income per common  share - basic for the three month  periods  ended
        March 31,  1998 and 1997 was  computed  by  dividing  net  income by the
        weighted  average  number of outstanding  common shares.  Net income per
        common share - diluted for the three month  periods ended March 31, 1998
        and 1997 is  computed  by dividing  net income by the  weighted  average
        number of  outstanding  common shares  including the dilutive  effect of
        stock options.  The weighted average number of outstanding common shares
        for the three month  periods ended March 31, 1998 and 1997 was 1,079,653
        and 1,076,720,  respectively. The weighted average number of outstanding
        common  shares  including  the dilutive  effect of stock options for the
        three month  periods  ended March 31,  1998 and 1997 was  1,279,707  and
        1,244,652, respectively.

4)      The provision  for income taxes for the periods  presented is based on a
        projected tax rate for the entire year. The Company's effective tax rate
        was 35% and 39% for the three  month  periods  ended  March 31, 1998 and
        1997,  respectively.   The  decrease  in  the  tax  rate  was  partially
        attributable to higher levels in the 1998 period of tax exempt municipal
        bond income and loan interest exempt from state tax.

5)      Effective  January 1, 1998, the Company  adopted  Statement of Financial
        Accounting  Standards No. 130, "Reporting  Comprehensive  Income".  This
        Statement requires disclosure of total nonowner changes in shareholders'
        equity as comprehensive income. Comprehensive income includes net income
        and net unrealized gain (loss) on securities  available for sale, net of
        taxes.  Total  comprehensive  income was  $268,000  and $138,000 for the
        first quarters of 1998 and 1997, respectively.

<PAGE>
<TABLE>
                     BAY COMMERCIAL SERVICES AND SUBSIDIARY

                     The Table Below Illustrates Changes in
 Major Categories of the Average Balance Sheets and Statements of Income and in
                     Certain Performance Ratios (Unaudited)
<CAPTION>
                                          Three Months Ended        Increase
                                                March 31,          (Decrease)
(Dollars in thousands):                      1998       1997        $       %
-------------------------------------------------------------------------------
<S>                                      <C>         <C>        <C>       <C>
Average Balances:
  Assets * ............................. $114,300    $99,507    $14,793   14.9%
  Securities - taxable* ................   18,359     12,565      5,794   46.1
  Securities - tax exempt ..............    4,671      3,426      1,245   36.3
  Total loans ..........................   77,355     70,234      7,121   10.1
  Nonaccrual loans .....................      433        261        172   65.9
  Deposits .............................  101,547     86,735     14,812   17.1
  Shareholders' equity * ...............   10,340      9,561        779    8.1

  Interest-earning assets ..............  103,965     89,821     14,144   15.7
  Interest-bearing liabilities .........   74,057     63,259     10,798   17.1


Income Statements:
  Interest income (1) .................. $  2,357    $ 2,042    $   315   15.4%
  Interest expense .....................      792        665        127   19.1
-------------------------------------------------------------------------------
    Net interest income (1) ............    1,565      1,377        188   13.7
  Taxable equivalent adjustment ........       28         21          7   33.3
-------------------------------------------------------------------------------
    Net interest income ................    1,537      1,356        181   13.3
  Provision for loan losses ............       10       --           10
-------------------------------------------------------------------------------
    Net interest income after provision
      for loan losses ..................    1,527      1,356        171   12.6
-------------------------------------------------------------------------------
  Noninterest income ...................      248        194         54   27.8
  Noninterest expenses .................    1,387      1,252        135   10.8
  Income tax expense ...................      134        116         18   15.5
-------------------------------------------------------------------------------
    Net income ......................... $    254    $   182    $    72   39.6%
===============================================================================
<FN>
 * before unrealized gain or loss on securities available for sale
</FN>
</TABLE>
<TABLE>
<CAPTION>
<S>                                          <C>        <C>       <C>
Performance Ratios: (2)                                           Change
                                                                  ------
Yield on average earning assets ..........   9.09%      9.13%     (0.04)%
Yield on average earning assets (1) ......   9.19%      9.22%     (0.03)%
Interest rate on average interest-bearing
    liabilities ..........................   4.34%      4.26%      0.08 %
Interest expense as a percent of average
    earning assets .......................   3.09%      3.00%      0.09 %

Net yield on average earning assets ......   6.00%      6.13%     (0.13)%
Net yield on average earning assets (1) ..   6.10%      6.22%     (0.12)%
<FN>
(1) Federal taxable equivalent basis.
(2) Ratios have been  annualized and are not  necessarily  indicative of results
    for a full year.
</FN>
</TABLE>


<PAGE>


                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                  Three months ended March 31, 1998 compared to
                        three months ended March 31, 1997

OVERVIEW

Certain  matters  discussed  in this  Management's  Discussion  and Analysis are
forward-looking  statements  that are  subject to risks and  uncertainties  that
could cause  actual  results to differ  materially  from those  projected in the
forward-looking  statements. Such risks and uncertainties include, among others,
(1) significant  increases in competitive pressure in the banking industry;  (2)
changes in the interest rate  environment  reduce margins;  (3) general economic
conditions,  either nationally or regionally,  are less favorable than expected,
resulting in, among other things, a deterioration in credit quality; (4) changes
in the regulatory environment; (5) changes in business conditions and inflation;
and (6) changes in securities markets.  Therefore,  the information set forth in
such  forward-looking  statements should be carefully considered when evaluating
the business  prospects of Bay Commercial  Services (the "Company") and Bay Bank
of Commerce (the "Bank").

Net income of the Company was $254,000 for the first quarter of 1998 compared to
$182,000 for the first quarter of 1997.  Net income per common share - basic was
$0.24 and $0.17 for the first quarter of 1998 and 1997, respectively. Net income
per common share - diluted was $0.20 and $0.15 for the first quarter of 1998 and
1997, respectively.

The $72,000 or 40% growth in net income for the first  quarter of 1998  compared
to the first quarter of 1997  principally  reflected  higher net interest income
and  noninterest  income during the 1998 quarter which were partially  offset by
increases in  noninterest  expenses,  income tax expense and  provision for loan
losses.  Net  interest  income  increased  $181,000  or 13% in the 1998  quarter
principally due to growth in average interest-earning assets which was partially
offset by a decline in the net yield on those  assets.  Noninterest  income rose
$54,000 or 28% in the 1998 quarter due to a gain on sale of loans  guaranteed by
the Small Business  Administration ("SBA loans") and increased merchant bankcard
activity.  These  increases  in income were  partially  offset by  increases  of
$135,000 or 11% in  noninterest  expenses,  $18,000 or 16% in income tax expense
and a $10,000  provision for loan losses  during the 1998  quarter.  The largest
factor  contributing to the higher noninterest  expenses during the 1998 quarter
was an  $85,000  or 12%  increase  in  salaries  and  employee  benefits,  which
primarily reflected staff growth in the Bank.

Total assets reached  $123,860,000 at March 31, 1998,  representing a $7,491,000
or 6% increase from December 31, 1997.  Total deposits of  $111,302,000 at March
31,  1998  grew  $10,167,000  or 10% from  year-end  1997  while  federal  funds
purchased  decreased  $2,500,000  or 100%.  Funds  from the  deposit  growth and
$12,995,000  received as securities  matured during the quarter were principally
invested in cash and cash  equivalents and in loans.  Cash and cash  equivalents

<PAGE>
increased  $15,002,000 or 199% and loans  increased  $5,586,000 or 8% during the
first quarter of 1998.

RESULTS OF OPERATIONS

NET INTEREST INCOME
Net interest  income,  the principal  source of the Company's  earnings,  is the
amount by which interest and fees generated by interest  earning  assets,  loans
and investments, exceed the interest cost of deposits and other interest-bearing
liabilities.  Net  interest  income is affected by changes in interest  rates as
well  as  the   composition   and   volume  of   interest-earning   assets   and
interest-bearing liabilities.

Net  interest  income of  $1,537,000  for the first  quarter  of 1998  increased
$181,000 or 13% compared to the first quarter of 1997. The increase  reflected a
$14,144,000 or 16% growth in average  interest-earning  assets. The net yield on
average earning assets declined to 6.00% for the 1998 quarter from 6.13% for the
1997 quarter.

The  increase  in  average  interest-earning  assets  between  the 1998 and 1997
quarters was  principally  due to growth of  $7,039,000  or 44% in average total
securities and $6,949,000 or 10% in average earning loans.  The average yield on
interest-earning assets for the first quarter of 1998 declined to 9.09% compared
to  9.13%  for the  1997  quarter  due to  increased  investment  in  short-term
securities. The average yield on earning loans for the 1998 quarter increased to
10.20%  from  10.03%  for the  1997  quarter,  however  the  ratio  of  loans to
interest-earning  assets  for the 1998  quarter  dropped to 74% from 78% for the
1997 quarter.

Average  interest-bearing  liabilities  increased $10,798,000 or 17% between the
1998 and 1997 quarters.  The average rate paid for interest-bearing  liabilities
increased to 4.34% for the 1998 quarter  compared to 4.26% for the 1997 quarter.
The higher  average rate paid during the 1998 quarter  principally  reflected an
increase in money market  deposit  rates.  The ratio of time deposits to average
total interest-bearing liabilities remained at 59% for both quarters.

INTEREST RATE SENSITIVITY
Interest rate sensitivity is the relationship  between market interest rates and
net  interest  income  due  to  the  repricing  characteristics  of  assets  and
liabilities. If more assets than liabilities reprice in a given period (an asset
sensitive  position),  interest  rate changes will be reflected  more quickly in
rates on earning assets. If interest rates decline,  an asset sensitive position
could adversely affect net interest  income.  Alternatively,  where  liabilities
reprice  more  quickly  than  assets in a given  period (a  liability  sensitive
position) a decline in market  rates  could  benefit net  interest  income.  The
results would reverse if market rates were to increase.

The  following  table  presents the  Company's  interest  rate  sensitivity  gap
position at March 31, 1998. For any given period,  the repricing is matched when
an equal amount of assets and liabilities reprice. The repricing of a fixed rate
asset or liability is  considered to occur at its  contractual  maturity or, for
those assets which are held for sale,  within the time period  during which sale
may  reasonably  be  expected  to  be  accomplished.  Floating  rate  assets  or
liabilities  are
<PAGE>
considered  to reprice in the period during which the rate can contractually
change.  Any excess of either assets or  liabilities  in a period results in a
gap, or  mismatch,  shown in the table.  A positive  gap  indicates asset
sensitivity and a negative gap indicates liability sensitivity.

<TABLE>
<CAPTION>
                                                    Interest Sensitivity Period
                                                3       Over     Over 1
As of March 31, 1998:                      months   3 months    year to     Over 5
(Dollars in thousands)                    or less  to 1 year    5 years      years       Total
----------------------------------------------------------------------------------------------
<S>                                       <C>        <C>        <C>        <C>        <C>
Interest rate sensitive assets:
  Loans (excluding nonaccrual) ........   $56,593    $ 3,074    $ 7,761    $12,395    $ 79,823
  Securities (before unrealized loss on
    securities available for sale......     3,697      1,303      4,730      9,742      19,472
  Federal funds sold and reverse
    repurchase agreements .............     8,400       --         --         --         8,400
----------------------------------------------------------------------------------------------
    Total .............................    68,690      4,377     12,491     22,137     107,695
----------------------------------------------------------------------------------------------
Interest rate sensitive liabilities:
  Interest-bearing transaction accounts    26,145       --         --         --        26,145
  Savings deposits ....................     6,595       --         --         --         6,595
  Time deposits, $100 and over ........    19,748      4,150      1,309        100      25,307
  Other time deposits .................    11,603      4,675      1,877          1      18,156
  Other borrowed funds ................     1,192       --         --         --         1,192
----------------------------------------------------------------------------------------------
    Total .............................    65,283      8,825      3,186        101      77,395
----------------------------------------------------------------------------------------------
Interest rate sensitivity gap .........   $ 3,407    $(4,448)   $ 9,305    $22,036    $ 30,300
----------------------------------------------------------------------------------------------
Cumulative interest rate
  sensitivity gap .....................   $ 3,407    $(1,041)   $ 8,264    $30,300
----------------------------------------------------------------------------------
Cumulative interest rate
 sensitivity gap to total assets ......      2.8%      (0.8)%      6.7%      24.5%
</TABLE>

This table  presents a static gap,  which is a position  at a point in time.  It
does not address the interest rate  sensitivity of assets or  liabilities  which
would be added through  growth,  nor does it anticipate the future interest rate
sensitivity of assets and  liabilities  once they have repriced,  and it assumes
equivalent  elasticity of assets and liabilities.  The interest rate sensitivity
analysis at March 31,  1998,  indicates  that the Company,  on a cumulative  gap
basis, is liability sensitive for the period "Over 3 months to 1 year" and asset
sensitive over the remaining time periods.

PROVISION AND ALLOWANCE FOR LOAN LOSSES
The Company  provides for potential loan losses by a charge to operating  income
based  upon the  current  composition  of the loan  portfolio,  past  loan  loss
experience, current and projected economic conditions, an evaluation of the risk
elements in the loan portfolio and other factors that, in Management's judgment,
deserve  recognition in estimating loan losses. In addition,  various regulatory
agencies, as an integral part of their examination process,  periodically review
the Company's  allowance for loan losses.  Such agencies may require the Company
to make  additions to the allowance  based on their  evaluations  of information
available to them at the time of their  examination.  Management will charge off
loans to the allowance when it determines there has been a permanent  impairment
of the related carrying values.

<PAGE>
The provision for loan losses  reflects an amount  sufficient to cover estimated
loan losses and to maintain the allowance  for loan losses at a level which,  in
Management's  opinion, is adequate to absorb potential credit losses inherent in
loans, outstanding loan commitments and standby letters of credit.

As of March 31, 1998, the allowance for loan losses was  $1,005,000  compared to
$1,000,000  at December 31, 1997.  The ratio of the allowance for loan losses to
total  loans  was 1.3% at March  31,  1998 and  December  31,  1997.  A  $10,000
provision  for loan losses was added during the first three months of 1998 while
no  provision  for loan losses was made  during the first three  months of 1997.
Although  Management uses available  information to provide for losses on loans,
future  additions to the allowance may be necessary based on changes in economic
conditions. Based upon information currently available, Management believes that
the  allowance  for loan losses at March 31,  1998 is adequate to absorb  future
possible  losses.  However,  no assurance  can be given that the Company may not
sustain  charge-offs  which are in excess  of the size of the  allowance  in any
given period.

Information  on  nonperforming  loans for the quarters  ended March 31, 1998 and
1997 and the year ended December 31, 1997 is summarized in the following table.
<TABLE>
<CAPTION>
                                                    March 31, December 31,    March 31,
(Dollars in thousands)                                  1998         1997         1997
--------------------------------------------------------------------------------------
<S>                                                   <C>          <C>         <C>
Net loan charge-offs ..............................   $    5       $   23      $   17

Ratio of net loan charge-offs to average loans ....      ---          ---         ---

Nonperforming loans:
  Nonaccrual ......................................   $  395       $  440      $  384
  Accruing loans past due 90 days or more .........      299          ---         224
  Restructured ....................................      469          471         ---
--------------------------------------------------------------------------------------
   Total nonperforming loans ......................   $1,163       $  911      $  608
--------------------------------------------------------------------------------------

Ratio of nonperforming loans to total loans .......      1.5%        1.2%        0.9%
Ratio of allowance for loan losses to nonperforming
  loans ...........................................       86%        110%        157%
</TABLE>

Total Bank  nonperforming  loans  increased  during the 1998 quarter by $252,000
primarily  due to the  addition  of two loans in the amount of  $299,000  in the
"Accruing loans past due 90 days or more" category. Subsequent to the end of the
first  quarter of 1998 these  loans were  performing  in  accordance  with their
terms.

NONINTEREST INCOME
The most significant changes in noninterest income between the first quarters of
1998 and 1997 came from a gain on sale of loans in the 1998  quarter  and higher
bankcard income. A sale of SBA loans during the first quarter of 1998 produced a
gain of $33,000.  There were no loan sales

<PAGE>
during the same  quarter of 1997.  A higher volume of merchant  bankcard 
activity during the 1998 quarter resulted in a $30,000 or 46% increase in
bankcard  income  compared to the first  quarter of 1997.  These increases in
income were partially  offset by a decrease of $11,000 or 31% in loan  servicing
income for the 1998 quarter,  principally  due to SBA loan payoffs between
the periods.

NONINTEREST EXPENSES
Total noninterest expenses of $1,387,000 for the first quarter of 1998 increased
$135,000 or 11% compared to the first  quarter of 1997,  including an $85,000 or
12% increase in salaries and employee benefits related  principally to increased
staffing.  Other areas of noninterest expenses exhibiting  significant increases
included bankcard  processing  expense, up $27,000 or 52%, and other noninterest
expenses,  up $27,000 or 13% compared to the first  quarter of 1997. As with the
increase  in bankcard  income,  the  increase  in bankcard  expense was due to a
higher  volume of  merchant  bankcard  activity  during  the 1998  quarter.  The
increase in other  noninterest  expenses  included  losses on  customer  deposit
accounts  and several  smaller  increases in areas of business  development  and
customer services.

PROVISION FOR INCOME TAXES
The  provision for income tax expense was $134,000 for the first quarter of 1998
compared to $116,000 for the first quarter of 1997.  The $18,000 or 16% increase
in income tax expense reflected higher taxable income for the 1998 quarter.  The
effective  income  tax  rates  were 35% and 39% for the 1998 and 1997  quarters,
respectively.  The lower rate for the 1998 quarter reflects higher levels of tax
exempt income from municipal securities and loan interest exempt from state tax.

FINANCIAL CONDITION

LOANS AND INVESTMENTS
Cash and cash equivalents of $22,550,000 at March 31, 1998 increased $15,002,000
or 199% from year-end 1997, reflecting both the deposit growth and a $13,095,000
or 40% decline in securities balances during the first quarter of 1998. The drop
in securities  balances  reflected  maturities  and calls during the first three
months  of  1998.  Total  loans  of  $79,715,000  at March  31,  1998  increased
$5,586,000 or 8% from December 31, 1997.

DEPOSITS AND OTHER BORROWED FUNDS
Reflecting the strong economy,  total deposits of $111,302,000 at March 31, 1998
increased $10,167,000 or 10% compared to December 31, 1997.  Noninterest-bearing
demand deposits  experienced strong growth during the quarter,  up $6,022,000 or
21%. Savings and  interest-bearing  demand deposits increased  $3,538,000 or 12%
and federal funds purchased  dropped  $2,500,000  from December 31, 1997.  Other
assets and other  liabilities  Interest  and fees  receivable  at March 31, 1998
increased  $116,000  or 20%  from  year-end  1997,  principally  reflecting  the
increase  in  interest-earning  assets  during  the  quarter.  A $65,000  or 15%

<PAGE>
decrease in other assets was principally  due to receipt of accrued  receivables
and a decline in prepaid  expenses.  Interest  payable and other  liabilities at
March 31, 1998,  dropped  $355,000 or 28% from year-end 1997  principally due to
the payment in 1998 of a cash dividend declared in 1997.

LIQUIDITY
Liquidity  is defined as the ability of the  Company to meet  present and future
obligations  either through the sale or maturity of existing  assets,  or by the
acquisition  of funds  through  liability  management.  The Company  manages its
liquidity to provide  adequate funds to support both the borrowing  needs of its
customers and  fluctuations in deposit flows.  The Company defines liquid assets
to include cash and noninterest-bearing deposit balances, federal funds sold and
reverse repurchase agreements,  all marketable securities with maturities of one
year or less, securities available for sale with maturities beyond one year, and
loans  held for  sale,  less any  reserve  requirements  being met by any of the
above.  Net deposits and short-term  liabilities  include all deposits,  federal
funds purchased,  repurchase agreements and other borrowings and debt due in one
year or less. The liquidity  ratio is calculated by dividing total liquid assets
by net deposits and short term  liabilities.  The Company's  liquidity  ratio by
this measure was 31% at March 31, 1998 and 32% at December  31, 1997.  It is the
opinion of Management that the Company's and the Bank's liquidity  positions are
sufficient to meet their respective needs.

In  addition,  the Bank  has  informal,  non-binding,  federal  funds  borrowing
arrangements  totaling  $6,000,000  with a  correspondent  bank  and  also has a
repurchase  facility  to meet  unforeseen  outflows.  As of March 31,  1998,  no
borrowed funds were outstanding from these credit facilities.

CAPITAL
The following  tables  present the Company's and the Bank's  regulatory  capital
positions  at March 31,  1998,  and average  assets over the three month  period
ended March 31, 1998:
<TABLE> 
<CAPTION>
                                               RISK BASED CAPITAL RATIO
                                               Company             Bank
(Dollars in thousands)                     Amount   Ratio     Amount   Ratio
----------------------------------------------------------------------------
<S>                                       <C>       <C>      <C>       <C>
Tier 1 Capital ...................        $10,336   10.6%    $10,154   10.4%
Tier 1 Capital minimum requirement          3,892    4.0       3,887    4.0
----------------------------------------------------------------------------
Excess ...........................        $ 6,444    6.6%    $ 6,267    6.4%

Total Capital ....................        $11,341   11.7%    $11,159   11.5%
Total Capital minimum requirement           7,784    8.0       7,774    8.0
----------------------------------------------------------------------------
Excess ...........................        $ 3,557    3.7%    $ 3,385    3.5%

     Risk weighted assets                 $97,296            $97,176
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                     LEVERAGE RATIO
                                               Company             Bank
(Dollars in thousands)                     Amount   Ratio     Amount   Ratio
----------------------------------------------------------------------------
<S>                                       <C>        <C>     <C>       <C>
Tier 1 Capital to average total assets    $10,336    9.1%    $10,154    8.9%
Range of minimum leverage ............      3,426-   3.0-      3,422-   3.0-
  requirement ........................      5,710    5.0%      5,704    5.0%
----------------------------------------------------------------------------
Range of excess ......................      4,626-   4.1-      4,450-   3.9-
                                          $ 6,910    6.1%    $ 6,732    5.9%

  Average total assets for first quarter* $114,197           $114,075
</TABLE>

(* Average  total assets do not include  unrealized  gains/losses  on securities
available for sale or excess servicing.)

The  Company  currently  does not  have any  material  commitments  for  capital
expenditures,  and in the opinion of  Management,  the  Company's and the Bank's
capital positions are sufficient to meet their respective needs.

INFLATION
It is  Management's  opinion that the effects of  inflation on the  consolidated
financial statements for the periods ended March 31, 1998 and 1997 have not been
material.



<PAGE>


                          PART II - OTHER INFORMATION


Item 5. Other Information: None

Item 6. Exhibits and Reports on Form 8-K.
    (a) Exhibits: None.
    (b) Reports on Form 8-K:
        No reports on Form 8-K were filed by the Company  for the quarter  ended
        March 31, 1998.


<PAGE>


                                   SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                                  BAY COMMERCIAL SERVICES
                                                  (Registrant)




Date:  May 4, 1998                                /s/ R. M. Kahler
                                                  -------------------
                                                  R. M. Kahler
                                                  President and
                                                  Chief Executive Officer
                                                  (Principal Executive Officer)



Date:  May 4, 1998                                /s/ R. D. Greenfield
                                                  ---------------------
                                                  R. D. Greenfield
                                                  Chief Financial Officer
                                                  (Principal Accounting Officer)